corporate law expert philippines

IMMINENCE OF THE PASSAGE OF TAX AMNESTY LAWS

By: Euney Marie J. Mata-Perez on November 22, 2018

We are finally moving forward on the proposed general and estate tax amnesties.

The Senate approved Senate Bill No. 2059 (SB 2059) on third and final reading last Nov. 19, 2019. On the other hand, the House of Representatives approved its counterpart House Bill No. 8554 (HB 8554) on final reading on Nov. 20, 2018.

Both SB 2059 and HB 8554 propose an estate tax amnesty through the payment of a six percent estate amnesty tax rate based on the decedent’s total net estate at the time of death, if no estate tax return was filed, or based on the net undeclared estate, if an estate tax return was previously filed with the BIR. The amnesty covers estates of taxpayers who died on or before Dec. 31, 2017 and whose estate taxes have remained unpaid or have accrued as of Dec. 31, 2017. Amnesty must be availed of within two years from the effectivity of the implementing rules and regulations (IRR) to be issued.

Both bills also propose a general tax amnesty (GTA) which shall cover all national internal revenue taxes, including VAT and excise collected by the Bureau of Customs for taxable year 2017 and prior years. The GTA under SB 2059 shall be availed of by paying an amnesty tax based on the taxpayer’s net worth as shown in a Statement of Assets, Liabilities and Networth as of Dec. 31, 2017, at the following rates:

1. For individuals, trusts and estates – five percent of net worth or P100,000, whichever is higher.

2. For corporations:

a. With subscribed capital of above P50 million
— five percent of net worth or P1,000,000, whichever is higher.

b. With subscribed capital of above P20 million to P50 million – five percent of net worth or P500,000, whichever is higher.

c. With subscribed capital of above P5 million to P20 million — five percent of net worth or P250,000, whichever is higher.

d. With subscribed capital of below P5 million — five percent of net worth or P100,000, whichever is higher.

The five percent amnesty tax can be reduced to lower rates of four percent, 4.25 percent to 4.5 percent If availed of within the first three months, six months or nine months, respectively, from the IRR’s effectivity. In other words, lower rates can be availed of by early availers.

The above GTA calculation which is based on the taxpayer’s total net worth differs from the proposal under HB 8554 imposing a two percent amnesty tax based on the taxpayer’s Statement of Total Assets as of Dec. 31, 2017.

The GTA can be availed of by filing a GTA return within one year from the effectivity of the IRR.

Further, both SB 2059 and HB 8554 provide for a tax amnesty on delinquents or TAD. SB 2059 proposes a TAD at the following rates:

HB 8554 added a TAD which may be availed of by withholding agents with respect to withholding taxes withheld at 100 percent of the basic tax. No such similar proposal is contained in SB 2059.

While both HB 8554 and SB 2059 are consistent with respect to the estate tax amnesty provisions, they vary when it comes to the GTA. The GTA under SB 2059 is calculated based on net worth, while the GTA under HB 8554 is calculated based on net assets. Both differ from Republic Act No. 9480, the last amnesty law passed in 2007, which calculated the amnesty tax based on increases in net worth.

The most significant addition proposed by the pending amnesty bills is the TAD. Previous amnesty programs always excluded assessments which have become final and executory or so-called delinquent accounts.

Both HB 8554 and SB 2059 provide for exclusions from the amnesty, as well as the privileges that an availment will bring. Such privileges include immunity from payment of taxes, as well as related civil and criminal penalties. Also, any amnesty tax return and Statement of Total Assets filed shall be inadmissible in evidence in any judicial, quasi-judicial or administrative proceedings.

Both HB 8554 and SB 2059 will be harmonized and reconciled by a Bicameral Committee composed of members from each House of Congress, which committee is already being constituted.

In any case, it is apparent that a new amnesty law covering estate taxes and general internal revenue taxes will be passed soon. The government is looking forward to increase in revenue collections from this amnesty program. Taxpayers, on the other hand, will have the opportunity to start the new year with a clean slate.

Euney Marie J. Mata-Perez is a CPA-Lawyer and the Managing Partner of Mata-Perez, Tamayo & Francisco (MTF Counsel). She is a corporate, M&A and tax lawyer. She is the newly-elected President of the Asia-Oceana Tax Consultants’ Association.

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